Codetermination in Germany

Codetermination in Germany is a concept with a solid history that involves the right of workers to participate in management of the companies they work for.[1] Known as Mitbestimmung, the modern law on codetermination is found principally in the Mitbestimmungsgesetz of 1976. The law allows workers to elect representatives (usually trade union representatives) for almost half of the supervisory board of directors. The legislation is separate from the main German company law Act for public companies, the Aktiengesetz. It applies to public and private companies, so long as there are over 2000 employees. For companies with 500-2000 employees, one third of the supervisory board must be elected.

Views differ on the goals of codetermination in general. Academic social reformers of a liberal persuasion maintain that workers are not merely factory parts, but citizens with equal rights. The Prussian state aimed for a conciliatory policy between capital and labour, and worker committees were one way to involve and bind workers into a system, and avoid conflict. In return unions conceded objectives on the establishment of a socialist state.

Codetermination aims principally to give worker a voice in the company decisions. This means matters on organisation of the business, the conditions of work and the management of personal and economic decisions affecting the future of the company and jobs. Workers therefore choose Works council representatives and members of the board to represent them.

On the assumption that the primary goal of employers is to maximise profits in the interests of shareholders, codetermination can reorient the company's goals in the interests of workers. A better balance may be struck so that the company interests are not so one sided. For unions, codetermination is part of democratising the economy. It is also a way for workers to better the terms and conditions of their contracts in an orderly and regulated way.

Much economic discussion mentions the thesis that employers also have an interest in codetermination. It can be an instrument for long term increase in productivity of the company. Some economists dispute this on the basis that the losses in efficiency in production outweigh any gains in productivity.[2]

According to the Betriebsverfassungsgesetz (BetrVG, Industrial Relations Law) the worker has a claim to codetermination about his own work position. He has to be informed about his position and responsibilities, and the job procedures (see also, the Arbeitsschutzgesetz). He has a right of making suggestions and to inspect certain company documents.

Operational codetermination

Operational codetermination (Betriebliche Mitbestimmung) concerns the organisation of the business, job arrangements, personal planning, guidelines for hiring, social services, time registration and performance assessments. This is found in the Betriebsverfassungsgesetz (BetrVG, Industrial Relations Law).

The Betriebsrat or works council is the organ of operational codetermination. In the public sector it is known as the Personalrat (or staff council).

Corporate codetermination

Corporate codetermination (Unternehmensmitbestimmung) concerns private (GmbH) and public limited companies (AktG). The Drittelbeteiligungsgesetz provides for one third of the supervisory board to be elected by workers in companies with more than 500 employees. For companies with more than 2000 employees the Mitbestimmungsgesetz requires half of the supervisory board (Aufsichtsrat) to be representative of the workers (subject to the chairman of the board being a shareholder appointee). In the coal, mining and steel industry the Montan-Mitbestimmungsgesetz allows complete parity between workers and shareholders for companies with over 1000 workers.

1848 The Frankfurt Parliament processed a minority proposal for industry organisation that included boundaries for corporate power by setting up works councils.

1850 The first workers' committees were established in four printing houses in Eilenburg, Saxony.

1891 After the repeal of the Sozialistengesetz workers' committees could be founded freely. However, this happened only where there were active unions.

1905 In reaction to a strike in the Ruhr coalmines, the Prussian Berggesetz introduced workers' committees in mining companies with more than 100 workers.

1916 The Law for the Fatherland Disaster Relief Team (Gesetz des Vaterländischen Hilfsdiensts) created workers' committees for all companies producing for the war effort with more than 50 workers. These committees had the right to be consulted in social affairs.

1920 The Betriebsrätegesetz (Works Council Act) mandated consultative bodies for workers in businesses with more than 20 employees. The social and economic interests of workers were to be represented and considered to the management.

1934 After the Nazis seized power, works councils were abolished and unions were broken up.

1946/47 The Allied Control Council, through the Kontrollratsgesetz No. 22, allowed works councils as in the Weimar Republic.

1951 The Montan-Mitbestimmungsgesetz (Coal, Steel and Mining Codetermination Law) required codetermination in businesses with more than 1,000 employees through workers' representatives making up one half of the supervisory boards.

On the worker side, representatives are to name a "further member" who acts explicitly in the interests of the community. The purpose was that in the lead up to World War, these companies were seen to openly support the Nazis financially. To prevent a stalemate on the board, a neutral member is to be appointed, which the parties must agree on. On the management board, one member must be a Staff-director (Arbeitsdirecktor) who cannot be appointed against the votes of the worker directors on the supervisory board.

Companies attempted to avoid the effects of the law after it was passed. The steel company Mannesmann registered another holding company outside the steel industry, intended to avoid the law. In response the Mitbestimmungsergänzungsgesetz (the Codetermination Supplementary Act, known as "Lex Mannesmann") was passed to prevent the practice.

Passed on the 11 October 1952, this law introduce one third selection of supervisory board directors by workers (§§ 76 ff. BetrVG). An exception is made for family companies. For each two shareholder members, the works council can send a third worker representative. They may also participate in committees of the supervisory board.

On 15 January 1972 the Act of 1952 was updated giving more powers for participation in personal and social affairs of company employees. Individual worker rights were strengthened in relation to unions.